April 15, 2013

Imagine the fright you would feel if you check your mail and see a letter from the IRS Audit Division. You might experience a similar sinking feeling getting an envelope from the local district attorney suggesting some wrongdoing on your part.

When you open the envelope, inside is a letter from the district attorney on his letterhead, official seal and all, that proclaims “Official Notice – Immediate Attention Required.” It goes to say that you have been accused of bouncing a check, and that according to the criminal law of your particular state, you could be imprisoned for up to X years and face a fine of Y dollars. However, if you participate in the “Bad Check Restitution Program,” repay all the money, take a class on financial responsibility, and pay a variety of fees, the district attorney will drop any criminal charges it could file against you and consider the case closed.

Here is page one of a sample four-page letter (click to enlarge) similar to ones used by about 140 DAs in 13 states:

In your fright, you probably didn’t read the letter carefully, and may have missed a key point:

*MOUSE PRINT:

“The Bad Check Restitution Program is administered by a private entity under contract with the XXX County District Attorney.”

So this letter is NOT actually from the local district attorney, but rather from a private debt collection company that is using the stationery of the local DA to very effectively scare the you-know-what out of the recipient as a means of collecting the debt (and their fees).

Speaking of their fees, this is a very lucrative business for these debt collectors, and most of the DAs even get a small cut of the proceeds. In one Massachusetts county, for example, when fees are added, the cost of bouncing a check could inflate the total you owe to two or three times the original check amount.

This can’t be legal, you are probably saying. Well, the district attorneys and the private debt collectors in this line of business lobbied Congress, and received an exemption from the federal Fair Debt Collection Practices Act. That law actually makes illegal many of the practices allegedly engaged in by these people. For example, using envelopes that disclose that the contents relate to a debt, threatening arrest or criminal prosecution when such action is not actually taken or contemplated, impersonating a law enforcement agency, and charging fees beyond those disclosed in the original contract are all prohibited practices.

Some state laws have their own debt collection laws with similar provisions, and it appears that these bad check programs may be running afoul of them in some cases.

The Boston Globe [alternate link] just published the results of its four-month investigation into the practices of the DAs and their debt collection companies in Massachusetts. And the New York Times looked at the workings of these programs across the country. Be sure to look at the graphics in the NY Times story for copies of the actual letters sent to check bouncers.

Sorry, I don’t have much sympathy here. It’s a free country, and people choose to get payday loans; choose to write bad checks; choose to not resolve them prior to the DA being involved. Yes, it’s a smarmy underhanded practice, but since when do we expect good, upstanding character from the government and/or loan sharks? Don’t like it, make better choices.

Private debt collectors try every which way in order to persuade someone into paying. The first response would be to see if the debt actually exists, and the second response would be to see who it is owed to. People fall for these tricks sometimes because the debt exists, but they are not aware that it does not need to be paid to the collector.

A few years ago a debt collector called my mother and told her that she still owed on a debt from over 10 years ago. I asked my mom about the debt and she said it was from a utility account that may not have been completely paid off. I first realized that the statute of limitation was probably up and I then asked her why the utility company did not collect and she did not know why.

I knew that the private debt collector would not be able to make a good case for why the debt should be paid so I had a little fun and asked them to provide documentation that they owned the debt, that the debt was not past the limitation, and that they could prove the total of the debt. After a few phone calls and letters they stopped contacting my mom, but it was fun talking with a couple of the collectors.

Moral of the story is: 1) Make sure you actually bounced a check 2) Make sure the person who is trying to collect can actually prove the money is owed to them 3) Make sure the money actually needs to be paid and the amount.